Q2. What are the future works in "The folk theorem for repeated games with observation costs" ?
The present paper finds that, for the standard folk theorem to extend to the generalized class of repeated games, it suffices that the cost of observing other players ’ actions without error is finite. According to this result, the folk theorem under perfect monitoring extends, with virtually no change, as long as perfect monitoring is an option for each player, even if it is a very costly option.
Q3. What is the probability of a player k receiving a bonus?
Since the referee’s approval is given with probabilityAPk in equilibrium, the expected net bonus is zero, and hence the continuation value from an examination period remains unchanged and equal to v∗k.
Q4. What is the main result in the folk theorem?
A major result in this literature is the folk theorem, which states that any feasible and individually rational payoff vector can be sustained if players are sufficiently patient.
Q5. What is the payoff profile for v intV?
For any v∗ ∈ intV ∗, there exists ¯ δ ∈ (0, 1) such that, for any δ ∈ [ ¯ δ, 1),there exists a sequential equilibrium whose payoff profile is v∗.7Proof.
Q6. What is the theory of infinitely repeated games?
The theory of infinitely repeated games has demonstrated that a group of agents with long-term relationships can sustain a large set of outcomes that cannot be sustained in static situations.
Q7. What is the effect of monitoring on the other players’ actions?
there is no gain from monitoring since defection is guaranteed to be an optimal action at any history (since a positive probability is assigned) and monitoring decisions have no direct influence on the other players’ future actions.
Q8. What is the set of feasible payoff vectors in their context?
To see this, note that the set of feasible payoff vectors in their context isV̄ ≡ {(vi − piλi(N \\ {i}))i∈N : v ∈ V and p ∈ [0, 1]N},which is a superset of V since V deals only with the case where pi = 0 for all i.
Q9. What is the argument that players have no incentive to do costly monitoring in the first period?
Under the strategy, since players are believed to cooperate in the first period, the previous argument implies that players have no incentive to do costly monitoring in the first period.
Q10. What is the possible payoff vector for the continuation strategy?
While any v ∈ V is feasible, players can also decrease their payoffs by paying observation costs, and the reduced payoff vector may not be in V .
Q11. What is the probability that player i loses a signal in the long run?
Repeating the previous argument, the authors conclude that the long-run loss to player i is at least1 2n(n− 1)FL 1 2 (0.9− 0.1)1 2 δ3 (1− δ)ε
Q12. What is the meaning of the folk theorem?
A seminal version of the folk theorem by Fudenberg and Maskin (1986) assumes perfect monitoring : players obtain accurate information about other players’ past actions.
Q13. What is the probability that a player is observed in a cooperative period?
Recall that µ is the probability that observation is prescribed in cooperation periods, which also determines how long a cooperative phase with the same ρ is expected to continue.
Q14. What is the reason for the difference between V and the set of feasible and individually rational?
Their proof relies on a strategy profile that works only if the frequency of monitoring is close to zero, and it is not straightforward to modify the strategy to accommodate payoff profiles in V̄ \\ V .1111Another reason for the difference between V ∗ and the set of feasible and individually rational payoff vectors is that the minmax value¯ ui is defined under the assumption that the other playersrandomize independently.